EUR/JPY Sees Selling Pressure Below 163.00s, Eurozone PMI Data Awaited

EUR/JPY is showing signs of weakness around 163.22 as Japanese CPI inflation data rose. Tokyo CPI surged to 2.6% YoY in February from 1.6% previously. Market anticipation is high for the ECB’s upcoming March meeting, where the interest rate is expected to remain unchanged at 4.5%.

The EUR/JPY pair dipped below the mid-163.00s during early European trading hours on Tuesday. The increase in Tokyo’s Consumer Price Index (CPI) for February fueled speculation of the Bank of Japan (BoJ) exiting its negative interest rate policy soon, which boosted the Japanese Yen (JPY) and weighed on the cross.

According to data from Japan’s Statistics Bureau, Tokyo CPI rose to 2.6% YoY in February, while CPI ex Fresh Food and Energy dipped to 3.1% YoY from 3.3% in January. This rise in price growth above the central bank’s target supported expectations of the BoJ’s first interest rate hike since 2007, strengthening the JPY against its peers.

BoJ board member Hajime Takata suggested the possibility of an early shift in the central bank’s monetary policy, indicating that the price target was nearing attainment. However, BoJ Governor Kazuo Ueda remained cautious, emphasizing the need for more data to confirm a sustainable wage-price cycle.

On the Euro side, the European Central Bank (ECB) is likely to maintain the main refinancing rate at 4.5% during its March meeting, according to expectations. ECB President Christine Lagarde’s recent remarks hinted at persistent disinflation but emphasized the need for further data before considering a rate cut. Market sentiment may be influenced by the tone of the press conference, with a less hawkish stance potentially leading to EUR selling pressure and acting as a headwind for the EUR/JPY pair.

Later in the day, PMI data from Spain, Italy, France, Germany, and the Eurozone will be released, followed by Eurozone Retail Sales on Wednesday. Market participants will closely monitor the ECB rate decision on Thursday for further direction in the EUR/JPY pair.

EUR/JPY